Confidentiality

Travelling abroad for work? What should you do if a Customs and Border Patrol agent, claiming lawful authority, demands that you unlock your computer or thumb drive or cell phone — full of client confidential information — and hand it over to be searched as you cross the U.S. border?

The confidentiality concern is more than hypothetical. According to the Department of Homeland Security, in February 2017 alone, CBP agents searched more than 5,000 cell phones, laptops and other devices. That’s as many searches as in all of 2015. CBP policy apparently permits U.S. customs agents to review any information that physically resides on travelers’ electronic devices, with or without any reason for suspicion, and to seize the devices pending inspection.

The ABA voiced concern in May, requesting that the Department of Homeland Security revise CBP’s procedures in order to better protect client confidential information from search or seizure at border crossings.

Evasive tactics necessary?

Under every state version of Model Rule 1.6, you have an ethical duty to safeguard the confidentiality of client information in your possession, and “few principles are more important to our legal system,” the opinion notes.

The thoroughly-reasoned and detailed New York opinion concludes that Rule 1.6, coupled with Rule 1.1 (Competence), raises obligations before a lawyer approaches the U.S. border; at the border when an agent seeks access to a device; and after an agent has reviewed clients’ confidential information.

Before crossing the border, Rule 1.6(c) and its comments, which require “reasonable efforts to prevent … unauthorized access to” client confidential information, means that you must take reasonable precautions in advance to avoid disclosing such information unless authorized by the client (which is unlikely). Depending on the circumstances, including the sensitivity of the information, these efforts may include not carrying any client confidential information across the border. If so, the opinion suggests: securely backing up client information and then crossing the border with a blank “burner” phone or laptop; turning off syncing of cloud services; signing out of web-based services; and/or uninstalling applications providing local or remote access to confidential information.

At the border, Rule 1.6(b)(6) and its comments come into play. It permits lawyers to disclose confidential information to the extent reasonably believed to be necessary when required “to comply with other law or court order,” including “a governmental entity claiming authority pursuant to … law.” But, the opinion cautions, disclosure is not “reasonably necessary” to comply with law if there are reasonable lawful alternatives to disclosure. The opinion concludes that “it would be an unreasonable burden” to require a lawyer to forgo entering the U.S. or to allow herself to be taken into custody or litigate the lawfulness of a border search. But the opinion also says that lawyers have a duty not to comply “unless and until” the lawyer “undertakes reasonable efforts to dissuade border agents from reviewing clients’ confidential information or to persuade them to limit the extent of their review.” To facilitate that challenge, you should carry ID confirming that you are a lawyer, notify agents that your device has client confidential information on it, request that the agents limit their review, and ask to speak to a superior officer, says the opinion.

After a search or seizure of client confidential information, Rule 1.4 (Communication) requires that you notify affected clients about what occurred and the extent to which their confidential information may have been reviewed or seized. That communication will let the client decide on possible responses, including a potential legal challenge.

Globe-trotting implications

Tennessee ethics lawyer Brian Faughan shared his comments on this opinion under the headline “Practicing law like it’s espionage.” The ways to carry out the potential duty to avoid taking confidential information across U.S. borders, as well as the other recommendations in the New York opinion, indeed make me think of spy craft, and to wonder if we are entering the world of novelist John LeCarre. That’s an uncomfortable thought — but under the reasoning of this opinion, such considerations are necessary as a matter of ethics.

A whistle-blowing general counsel won an $8 million federal jury verdict earlier this month, in a case that might encourage other GC’s to call out corporate wrongdoing.

Compensatory and punitive damages

After deliberating only three hours, the jury in Wadler v. Bio-Rad found that the GC had a reasonable basis for reporting his suspicions about the company’s Chinese sales operations to the organization’s audit team.

The GC’s allegations prompted an internal investigation by outside counsel, which concluded that the sales team had not violated the Foreign Corrupt Practices Act.

But the jury found that the company had retaliated against the GC by firing him after the report, in violation of the Sarbanes-Oxley Act, and that absent the report, he would not have been terminated for legitimate reasons.

The award to the GC included $5 million in punitive damages. Speaking to Law360 (subs. req.), the GC’s lawyer attributed the punitive damages to the company CEO’s creation of a back-dated negative performance review; computer metadata proved that the review hadn’t been created until after the GC had been fired.

Does SOX protection trump company’s privilege?

Judgment on the jury verdict was entered on February 10. It will almost certainly be the subject of post-trial motions and possibly an appeal.

But the verdict stands out as a rare trial win for a GC in a whistle-blower case based on retaliatory firing. Such suits have often been foreclosed before trial because of restrictions on a company lawyer’s ability to use confidential information of the employer in proving the GC’s case.

In the Bio-Rad case, however, the federal magistrate judge found at the end of 2016 that the whistle-blower protections of SOX trumped the company’s attorney-client privilege, and turned back the company’s motion to preclude use of privileged information at trial.

The GC’s ability to use this information as evidence arguably spelled the difference here.

Key factors in the magistrate judge’s ruling:

as a federal claim asserted under SOX, the federal common law of privilege applied; that took the case outside the scope of the California Supreme Court’s 1994 ruling in General Dynamics Corp. v. Superior Court, which had limited retaliatory discharge claims to those that could be established without breaching the attorney-client privilege;

the text and structure of SOX doesn’t indicate that in-house lawyers aren’t protected from retaliation, and SOX § 1514(A)(b) and particularly the SEC’s final rule (17 C.F.R. § 205) preempts the California state ethics rule on client confidentiality;

Model Rule 1.6 is the guiding standard, which — unlike the California state rule — permits a lawyer to reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary to establish the lawyer’s claim in a controversy between the lawyer and the client; and

Bio-Rad made so many disclosures to the SEC, the DOJ and the DOL during the course of previous investigations and administrative proceedings, and to the court in the pre-trial phase of the case, that the company waived the privilege as to many communications.

The SEC had filed an amicus brief during the briefing on the company’s motion to exclude, supporting the position that the magistrate judge took — that SOX trumps state legal ethics rules regarding client confidentiality.

Trend or outlier?

Whether the Bio-Rad case will be upheld, and whether it is a trend or an outlier, remain to be seen. But in the short run, it may encourage other GC’s to blow the whistle.

Old-time lawyers say that it used to be easy to get the court’s permission to withdraw from a case. You would just go to the judge and state, “Your Honor, we are not ready to go forward, and I am seeking leave to withdraw, because Mr. Green has not arrived.” You know: “Mr. Green” aka the moolah, aka the promised fee from the client. And, so the story goes, the judge would bang the gavel and grant your motion. (For a variation on the theme, see The Lincoln Lawyer, 2011, starring Matthew McConaughey.)

Such stories may be apocryphal, and whether true or not, hopefully we’ve come a long way in our understanding of the duties we owe clients in seeking to terminate our representation. When withdrawing requires permission of a tribunal, as it does under most court rules, a continuing ethics quandary has been how much information we are permitted to disclose to the court in justifying the request. On December 19, the ABA’s Standing Committee on Ethics and Professional Responsibility issued some guidance on the subject.

When you “may withdraw”

Model Rule 1.16(b), and state rules based on it, describe when you “may” withdraw from a representation, including when the client “substantially fails to fulfill an obligation to the lawyer regarding the lawyer’s services,” and the client has been warned that the lawyer will withdraw unless the obligation is fulfilled. Comment [8] gives the example of a client refusing to abide by an agreement concerning fees or court costs.

In civil litigation, the quandary arises because Model Rule 1.6 requires the lawyer to maintain confidentiality about everything “relating to the representation,” with only narrow exceptions, and Rule 1.16(c) requires the lawyer to comply with a tribunal’s rules in seeking to withdraw.

You have to phrase your withdrawal request to the tribunal in some way — but how far can you go in revealing the reason? In Formal Opinion 476, the ABA Committee acknowledged the difficulty, quoting one characterization of the issue as a “procedural problem that has no fully satisfactory solution.”

Will “professional considerations” suffice?

The ABA Committee noted that many courts will simply accept a reference to “professional considerations” that are prompting the motion to withdraw. (Sounds just a little like “Mr. Green.”) Rule 1.16 cmt. [3] endorses that approach, advising that the “statement that professional considerations require termination of the representation ordinarily should be accepted [by the court] as sufficient.”

But some courts won’t accept “professional considerations” as sufficient. The Committee cited withdrawal decisions from several jurisdictions that reflected details about the money owed by the client, the specific legal services carried out and other facts, indicating that the court had required much more than a generic statement from the lawyer about “professional considerations.”

The Committee pointed out that Model Rule 1.6(b)(5) and its cmt. [11] permit some disclosure of confidential client information in fee-collection suits by lawyers. A motion to withdraw for failure to pay is “generally grounded in the same basic right of a lawyer to be paid pursuant to the terms of a fee agreement,” said the Committee. Also, many court rules specify that motions to withdraw must be supported by “facts,” or “satisfactory reasons,” or similar showings.

Limit the info … but explain if required

Therefore, the Committee concluded, where the assertion that “professional considerations” justify withdrawal is not acceptable, and “when a judge has sought additional information” to support the motion to withdraw for non-payment, then the lawyer may “disclose information regarding the representation of the client that is limited to the extent reasonably necessary to respond to the court’s inquiry and in support of that motion to withdraw.”

What about the judicial officers considering such motions? The Committee advised that judges “should not require the disclosure of confidential client information without considering whether such information is necessary to reach a sound decision on the motion.” And if detailed information is required, courts should mitigate potential harm to the client, such as by allowing disclosure under seal or in camera, and by using redaction.

There will always be a tension between the duty of confidentiality and the necessity of providing reasons for a request to withdraw from representation. But Opinion 476 at least charts a path forward when facing the need to withdraw because of a client’s failure to pay.

Regulatory compliance, cyber-security issues, herding legal operations staff — in-house legal practice is more complex than ever. One element that remains a continuing challenge is protecting the organization’s attorney-client privilege. Slipping up can risk the loss of the privilege in litigation involving the company, and can potentially result in an order to produce otherwise confidential communications to the other side. What are some signs that your law department needs to tune up its privilege IQ?

Some privilege ABC’s

First, for purposes of attorney-client privilege, the client is the organization, and in-house counsel is the attorney, just as much as outside counsel is. So communications between the law department and management, for the purpose of getting or giving legal advice, made in confidence and kept confidential, can qualify for privilege protection. The facts aren’t privileged, of course — only the actual communication.

Signs of trouble

Outside that rubric, however, issues could lead to the loss of privilege and disclosure of your confidential communications. Here are five signs of problems.

The department’s lawyers overshare. Sharing communications is good, right? Sometimes. But too much sharing is not. E-mailing confidential legal advice with a cc: to a long list of managers and employees who have no need to know it can risk the privilege — because it can be seen as negating the confidentiality that is a hallmark of a privileged communication. (On the flip side, however, when managers discuss business issues, dropping the name of the company GC into the cc: box does not make the communication privileged.)

You fail to mark your communication as privileged; or you mark everything as privileged. When opposing counsel makes a request for documents, nothing quite says “privileged” like a document that you have clearly marked “CONFIDENTIAL – ATTORNEY-CLIENT PRIVILEGE.” Failing to mark that e-mail or that report to management might not result in an order to disclose it — but why not express your intention at the time you make the communication? It can only help — unless you automatically mark everything that comes out of the law department as privileged (like your lunch invites and inter-office jokes). Then, a court reviewing your claim of privilege might be less likely to take you seriously.

You mix business advice with legal advice without distinction. We all know that the client expects in-house counsel to wear many hats, and giving advice on business issues comes with the territory. The problem is that business advice does not qualify for protection by the attorney-client privilege. If you mix business advice and legal advice in one memo without any distinction, you might be inviting a privilege problem. Some courts might parse the communication and shield the legal advice; but in other jurisdictions, the court will determine what the “predominant purpose” of the whole communication is, and you might come out on the losing side of that equation. It’s better to keep legal advice and business advice separate, if you can.

You haven’t educated managers and employees about the ground rules of privilege. You don’t have to make it a law school course, but it really helps if your client understands the basics: that they can’t share with others the privileged communications they have with you; that they should keep documents marked as privileged in a safe place; that making the legal department a cc: on an e-mail is not sufficient to make it privileged. Create a check-list for the department heads you work with. They’ll appreciate knowing the lay of the land.

You don’t acknowledge the nuances of foreign privilege law. The global nature of business and legal practice today means that you likely need to understand privilege law as it plays out internationally. Be aware of the issues. For instance, some courts hold that a legal practitioner functioning in a foreign country qualifies as an “attorney” for purposes of the privilege; others have ruled that communications with foreign in-house counsel are only privileged if they qualify under the privilege laws of the foreign country. Several countries (and the European Union) do not recognize any evidentiary privilege for communications between a company’s in-house lawyers and management or employees.

Addressing these potential problems should help maintain attorney-client privilege.

Microsoft’s plans to acquire LinkedIn for $26.2 billion was the talk of the tech world late last month. The combination of these behemoths is going to give Microsoft access to all LinkedIn’s data. Microsoft’s CEO has given some examples of the potential synergies that will result, like “getting a feed of potential experts from LinkedIn whenever Office notices you’re working on a relevant task.” But legal ethics issues loom, involving our duty of confidentiality under Rule 1.6.

Aim: monetizing your links

With its 433 million members, LinkedIn is the #1 professional networking site for lawyers: 93-99 percent of lawyers across firm-size categories have profiles, according to statistics from the ABA and others.

The main thing that Microsoft gets out of the LinkedIn deal is data about you. As a writer for Forbesnoted, LinkedIn “knows where people work, their skills, ambitions, who they went to school with and what interest groups people share. LinkedIn knows about people better than Microsoft does. Or did.” Now, Microsoft will be able to combine that data with all the many products you use, from your Outlook calendar to Skype to Word.

What’s the money angle? LinkedIn’s CEO described how the combination could give “sponsored content customers the ability to reach Microsoft users anywhere across the Microsoft ecosystem.” In other words, to advertise to you in a totally targeted way as you work with any Microsoft product in its “ecosystem.” Pop-up ads for a treatise when we’re working on a brief in Word? That would be a stupid move, notes legal tech guru Bob Ambrogi, and hopefully Microsoft won’t go there.

What are the ethics issues?

But this combination does raise some possible ethics issues, centering on your duty of confidentiality.

The confidentiality rule says that you “shall not reveal information relating to the representation of a client,” with very limited exceptions. The duty includes not disclosing the identity of your client, which in many instances can be extremely sensitive.

In a good analysis of the issue, ethics educator Stuart Teicher points out that leveraging data in our Outlook calendar can cross that exact line by revealing our client relationships. Teicher posits that on Outlook, Microsoft “might see a potential client introduction (which lists Pete Smith as present), a court appearance (which lists Pete Smith as present), and a meeting for settlement purposes (which lists Pete Smith as present). It’s not going to be too tough for the Microsoft bots to figure out that Pete Smith is your client.”

Or, says Teicher, looking at Outlook might show that you are heading to Chicago. Microsoft might “then cross reference our LinkedIn connections and send a message to one of them that says something like ‘Your connection Bruce Kramer is going to Chicago next week. Why don’t you look him up?'” If the purpose of your trip is to confidentially scout out a potential acquisition on behalf of your client, your client doesn’t want data out there from which the seller or its agents can figure out what your interest might be.

Keep your eyes open

Nothing like this has happened yet — the mega-combo has just been announced, after all — and the ethics issues are only potential ones. But this development bears watching. As Teicher correctly points out, that’s the way to fulfill your duty of competence, which includes staying up to date on changes in the law, “including the benefits and risks associated with relevant technology.”

Courts often analyze motions to disqualify by balancing the need to uphold professional standards against the rights of clients to choose their lawyers freely. The New Jersey court of appeals struck that balance earlier this month in upholding the disqualification of a lawyer who violated a confidentiality order, finding that the lawyer knowingly disobeyed a court order, among other violations.

Looking for class action plaintiffs

The lawyer sued a car dealership and others in a putative class action, alleging fraud and the violation of various state consumer statutes. The parties agreed on and the court entered a confidentiality order that allowed any party to designate confidential documents produced in discovery as “Attorneys’ Eyes Only.”

The confidentiality order mandated that the parties could use such material “solely for purposes of the prosecution or defense of this action.”

After several twists and turns, the suit was trimmed of its class allegations and proceeded solely against the dealership.

However, as the trial court wrote, “lo and behold, after the dealer produced the documents under the confidentiality order, a new [class action] lawsuit was filed in [another] county,” against the same defendant, based on the same theories, and initiated by the same lawyer, who admitted that she had used the “Attorneys’ Eyes Only” documents in soliciting the named class-action plaintiffs to file suit in the second action.

The lawyer claimed that this did not violate the confidentiality order; the trial court disagreed, and “relieved [the lawyer] from serving as plaintiff’s counsel” because of the violation. The trial judge also referred the matter to the state Office of Attorney Ethics. Following the client’s interlocutory appeal, the appellate division affirmed the disqualification order.

Inherent authority to impose DQ remedy

New Jersey’s Rule of Professional Conduct 3.4(c), identical to Model Rule 3.4(c), forbids a lawyer to “knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists.”

The appeals court held that the lawyer knowingly used materials designated as “Attorneys’ Eyes Only” to solicit clients and to initiate a separate lawsuit against the car dealership, and that the trial court had not abused its discretion in using its inherent powers to sanction the lawyer for her ethical violation by disqualifying her.

Quoting from its prior holdings on balancing the need for ethical conduct against client choice, the court of appeals said that “there is no right to demand to be represented by an attorney disqualified because of an ethical requirement.”

“We underscore that an attorney’s failure to conform to his or her ethical obligations may imperil their client’s right to counsel of their choice.”

Not only did the lawyer’s client lose out; the lawyer put her own license in jeopardy, with the court’s referral to the state disciplinary agency.

You’re chatting with your pals at the bar association cocktail hour, and talk turns to the indictment just handed down against a former city official. Someone says, “Hey, didn’t your firm used to represent her?” “Yes,” you reply, “and a couple years ago, I had a really interesting case involving her. Maybe I shouldn’t discuss it — but I guess it’s of public record, so….” And with that, you’re off to the races, discussing your former client’s old case. Have you done anything wrong, since it’s all “of public record”?

“Publicly available” vs. “generally known”

Model Rule 1.9(c) says that when you have formerly represented a client in a matter, you shall not thereafter:

(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or

(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

Comment [8] notes that formerly representing a client “does not preclude the lawyer from using generally known information about that client when later representing another client.”

But significantly, just because information might be a matter of “public record,” or “publicly available” in a court filing, does not necessarily mean that it is “generally known” within the meaning of the ethics rules. That’s the holding of a case decided last month by the Pennsylvania Superior Court, Dougherty v. Pepper Hamilton LLP, et al.

Disloyal use?

The ruling in Dougherty revives a union official’s suit against the Pepper Hamilton firm for breach of fiduciary duty. The firm had formerly represented the official when he was subpoenaed by a grand jury as part of a federal bribery investigation. An FBI affidavit was part of that investigation; it was later mistakenly filed on the federal court’s electronic PACER system. Subsequently, the firm represented the Philadelphia Inquirer in defending a defamation suit by the same official against the newspaper. In representing the newspaper, Pepper Hamilton used the FBI affidavit.

The official alleged that the firm breached its duty to him by using information from the former representation, including the FBI affidavit. Pepper Hamilton countered that since the information was “publicly available,” it could not form the basis of a disloyalty claim.

The state court of appeals agreed with the official, reversing the lower court’s grant of summary judgment in favor of the law firm.

Duty of confidentiality not “nullified” by public record

Whether information is “generally known” for purposes of Rule 1.9, said the court, depends on the circumstances. The court said that publicly-accessible electronic data could be “generally known” if it is easily accessible, such as through public indexes. But information is not generally known if it would be difficult or expensive to obtain or would require special knowledge.

Quoting opinions from Ohio and West Virginia, the Dougherty court noted that “an attorney is not free to disclose embarrassing or harmful features of client’s life just because they are documented in public records or the attorney learned of them in some other way,” and that “the ethical duty of confidentiality is not nullified by the fact that the information is part of a public record or by the fact that someone else is privy to it.”

There were genuine issues of fact, the court said, about whether the FBI affidavit was actually “generally known,” and these questions were enough to keep the case against the law firm alive.

Your lips are sealed

In all, the safest thing to do at a cocktail party is to keep quiet about information you know as a result of formerly representing a client, even if you think that it is of “public record.” That’s the best way to steer far clear of any chance of misconduct. And when it comes to “using” information of a former client on behalf of another client, careful analysis is required before you conclude that the “generally known” exception applies.

A fired GC of a public company recently fended off dismissal of his whistle-blower retaliation claims in California district court. Adding to a split in authority, the chief magistrate judge for the Northern District of California held (1) that the protections of the Dodd-Frank Act applied even though the GC made his report internally, and not to the SEC; and (2) that the anti-retaliation provisions of Dodd-Frank and the Sarbanes-Oxley Act can impose liability on individual directors, and not only the company.

In denying the company’s motion to dismiss in Wadler v. Bio-Rad Laboratories, Inc., the district court ruled that the GC could sue the individual directors in addition to the company, and upheld his SOX claim against one director. On November 23, Bio-Rad moved to certify the ruling for interlocutory appeal.

In his suit against Bio-Rad, the former GC alleged that he was fired in retaliation for reporting to upper management his concerns about the company’s possible violation of the Foreign Corrupt Practices Act, stemming from the company’s dealings in China. The GC asserted claims under both Dodd-Frank and SOX.

Company-only reporting protected

Dodd-Frank and SOX federalize some aspects of the ethical duty of confidentiality, and make some reporting of client misconduct mandatory. The relationship between the federal statutory scheme and various state versions of Model Rule 1.13, which applies to lawyers in “reporting up” and “reporting out” client misconduct that could substantially harm the company, has been the subject of significant commentary. See, e.g., here (pub. forthcoming, 33 Yale J. on Reg., 2016; draft cited with permission).

The issue of whether Dodd-Frank’s anti-retaliation provisions apply to individuals who only report their concerns internally and not to the SEC has divided the federal Courts of Appeal that have ruled on it.

The SEC’s own position, as set out in 17 C.F.R. § 240.21F-2, is that Dodd-Frank does protect internal whistle-blowers.

Most recently, in Berman v. Neo@Ogilvy LLC, the Second Circuit ruled in line with the SEC’s view. But the Fifth Circuit, in 2013, ruled the other way, holding that only individuals who have provided information or assistance to the SEC qualify for anti-retaliation protection.

In Wadler, the district court wrote that the SEC’s position has been accepted by a majority of the lower courts that have grappled with the issue, which have accorded deference to the agency’s position. Therefore, the fact that the company’s GC didn’t turn outside with his FCPA concerns did not defeat his claim, the court held.

Individual directors liable

In enacting SOX, Congress did not expressly include directors in the list of corporate “agents” who are subject to individual liability for retaliating against a corporate whistle-blower. But in Wadler, the court said that didn’t signify a legislative intent to shield directors from such liability. Instead, the “context and general purpose” of SOX supports “the conclusion that the term ‘agent’ is intended to encompass directors.” As for Dodd-Frank, the court wrote that Congress intended that Act’s anti-retaliation reach to be “at least as extensive” as that of SOX.

Headed for SCOTUS?

In mid-November, the SEC issued its annual report to Congress on the Dodd-Frank whistle-blower program, reporting that the number of whistleblower reports to the agency has increased every year since the program was instituted in 2011. (H/T to Kevin LaCroix over at The D&O Diary.) In Berman, the Second Circuit case, the court granted a stay on October 14, to allow the defendants to petition for Supreme Court review. So stay tuned. The extent of a lawyer’s duty and ability to report up and out, and the liability that can be imposed for retaliatory conduct, might be headed for further resolution by the high court.

Both in-house and outside counsel can learn valuable lessons from In re General Motors, a recently-issued federal opinion on the attorney-client privilege and work-product doctrine. While some recent decisions have chipped away at the protections for attorney notes and internal memos, this opinion reaffirms that documents a lawyer creates during a corporate investigation will be protected if kept confidential.

Notes and memos from ignition switch investigation

In connection with GM’s investigation of ignition switch problems, the company’s outside counsel conducted more than 350 interviews of over 200 current and former employees. The interview notes were used to generate a report that was later publicly disclosed, referred to in the opinion as the “Valukas Report.”

Plaintiffs moved to compel production of the notes and memos. But Judge Furman, of the Southern District of New York, held that both the attorney-client privilege and the attorney work-product doctrine protected: (1) attorney notes taken during interviews; (2) summaries generated after the interviews; and (3) formal memos created after the interviews.

According to the court, Upjohn Co. v. United States – the seminal case on the attorney-client privilege and work-product doctrine in the corporate context – squarely applied.

First, the interviews were conducted in connection with GM’s request for legal advice in light of possible misconduct, accompanying government investigations and anticipated litigation.

Second, outside counsel began each interview by stating that its purpose was to collect information to assist with providing legal advice, and therefore, the matters discussed would be confidential.

Third, the interview materials were shared only with GM’s other outside counsel, and with GM itself.

A promise to disclose facts – not lawyer communications

Plaintiffs argued that the attorney-client privilege did not apply because GM’s CEO testified before Congress that everything related to safety would be shared. That testimony, according to the plaintiffs, demonstrated there was no intent to keep confidential the materials generated in preparing the Valukas Report. The plaintiffs also argued that interview materials were generated to provide business advice, not legal advice. Judge Furman rejected both arguments.

The court distinguished between facts and communications, reasoning that GM’s promise to disclose facts failed to show any lack of intent to keep the communications confidential. A contrary rule, according to the court, would mean attorney-client communications connected to any publicly-filed document or court pleading would be subject to disclosure.

And while GM’s CEO promised transparency with regard to the underlying facts, she did not pledge to disclose attorney-client communications. Moreover, outside counsel informed each interviewee that the interview was to gather information to help provide legal advice and was confidential. That, according to the court, further demonstrated GM’s intent to maintain confidentiality.

Advice “not exclusively legal”

The court recognized that the reason for the ignition switch investigation was “not exclusively legal.” But citing the D.C. Circuit Court’s decision last year in In re Kellogg Brown & Root (which we previously blogged about here), the court recognized that if legal advice is “one of the significant purposes” of the investigation, the privilege applies.

In GM’s case, the company hired lawyers in the face of criminal investigations by the Department of Justice and an inevitable storm of civil litigation. In that context, GM’s outside counsel was retained to provide legal advice on a “wide variety of matters relating to the recalls.” Accordingly, providing legal advice was a significant purpose of the investigation, thus raising the privilege.

Factors supporting confidentiality and privilege

This case points to some key factors that establish a company’s intent to maintain the confidentiality of an internal investigation:

Expressly advising the employee that the interview’s purpose is to assist in providing legal counsel and should be kept confidential – before generating work product such as notes and memos;

Making clear that the lawyer is providing legal advice, if that is the case.

Business advice may sometimes naturally accompany a corporate investigation. Under the reasoning of the GM decision, mixed business and legal advice may be privileged if a significant purpose is to give legal advice. Check the law in the applicable jurisdiction, however, on the extent to which mixed business and legal advice can be deemed privileged, and the tests used to analyze that issue.

The Ohio Supreme Court will accept public comment until October 15 on proposed amendments to the Ohio Rules of Professional Conduct and the Ohio Rules for the Government of the Bar. Ohio becomes the latest state to consider incorporating some version of the Model Rule revisions that the ABA adopted in 2012 and 2013.

Rule 1.1 (Competence) would add a comment addressing the duty to keep abreast of technology;

Rule 1.1 would also add a comment advising that outsourcing legal services should ordinarily require the client’s informed consent;

Rule 1.6 (Confidentiality) would require lawyers to make reasonable efforts to prevent unauthorized disclosure of or access to information relating to the client’s representation;

Rule 1.6 would also allow lawyers changing employment to make a limited disclosure of confidential information in order to help detect and resolve conflicts of interest created by the move;

Rule 7.3 (Solicitation of Clients) would bar in-person, live telephone or real-time electronic solicitation of a minor, an incompetent person or a person the lawyer knows or reasonably should know is unlikely to be able to exercise reasonable judgment in employing a lawyer. (This proposed new rule was not part of the ABA’s recent revisions to the Model Rules.)

Proposed change to firm insurance coverage requirements

In addition, a proposed amendment to Rule III to the Rules for the Government of the Bar would increase the level of professional liability insurance that LPA’s corporations, legal clinics, LLC’s and LPA’s must maintain. The existing rule requires coverage of $50,000 per lawyer/per claim and $100,00 per lawyer in the aggregate. The proposed rule would increase the level to $100,000 per lawyer/per claim and $300,000 per lawyer in the aggregate.

About this Blog

The Law for Lawyers Today is a resource for law firms, law departments and lawyers needing information to meet the challenge of practicing ethically and responsibly. Here you’ll find timely updates on legal ethics, the “law of lawyering,” risk management and legal malpractice, running your legal business— and more.

About Thompson Hine

For more than a century, Thompson Hine has been committed to excellence on behalf of our clients, our people and the communities in which we live and work. Clients rank us among the top firms in the United States for client service year after year, and we are proud of the accolades we have earned in recognition of our capabilities and leadership.